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Abstract
The Less Favoured Areas (LFAs) Directive
(75/268) which was introduced in 1975, was the first
common European instrument of regional agricultural
structural policy. LFAs are areas where agriculture is
hampered by permanent natural handicaps. The major
objectives were to ensure the continuation of farming,
thereby maintaining a minimum population level and
preserving scenic landscapes and environmentally
valuable habitats. In the Netherlands, the LFA measure
is used as an additional payment, to compensate farmers
for negative economic effects due to the conservation of
these natural handicaps. It was not implemented as a
stand alone policy, but is linked to measures aiming at
active nature and landscape conservation management.
In this paper, the effects will be examined of the
regulations aiming at the conservation of natural
handicaps on farm businesses within LFAs, when
comparing them to farm businesses outside LFAs, where
these regulations and handicaps do not exist. The main
data source that was used is the Farm Accountancy Data
Network. Reference groups of farms were compiled with
the use of the simple and multiple imputation approach
in Stars (Statistics for Regional Studies). Both analyses
were tested with the use of a parametric and a
nonparametric test. When comparing the results of both
analyses, it can be concluded that there is no evidence
that there is a statistical difference in family farm
income corrected for and not corrected for LFA
payment between the LFA farm businesses and the
reference groups.
Based on these findings it can be concluded that the
size of the compensatory allowances is small and there is
no evidence that it has a significant effect on the family
farm income of LFA farm businesses. The main purpose
of the Dutch LFA policy is to compensate farm
businesses for negative economic effects due to the
conservation of natural handicaps. Although this may be
true for some individual farms, based on the methods
used in this paper, it appears not to be the case for the
collectivity of LFA premium beneficiaries as a whole.